More companies are embracing comprehensive financial wellness programs instead of basic financial education because of the bottom line benefits these plans offer.
It has been proven that financial stress has a negative impact on an employee’s health. Stressed out employees are more prone to health risks and higher health care costs, said Linda Robertson, a senior resident financial planner at Financial Finesse.
Financial Finesse has studied the effects of financial wellness programs for 13 years. In its most recent study, the company compiled data from 3,576 workshops it conducted with clients between Jan. 1, 2007, and Dec. 31, 2012.
Out of all those who participated in the workshops, 88 percent of participants who answered the survey said they took action to improve their finances.
The most common behavioral changes were reviewing the asset allocation in their retirement plan, using the calculators or worksheets provided by Financial Finesse, reducing monthly expenses or credit card debt and increasing contributions to their retirement plan.
On average, participants made three changes to improve their finances.
One of the major benefits of offering a financial wellness program is a reduction in health care costs.
“When you are looking at health care, financial stress is causing many of these chronic illnesses,” said Robertson. “We can see 50 percent higher health care costs for employees under financial stress.”
Having a corporate-sponsored financial wellness program reduces health care costs, increases productivity and performance and allows more employees to retire on time, she said. There also is an increase in satisfaction with employee benefits.
In Financial Finesse’s most recent survey, 62 percent of plan sponsors said they see a connection between financial wellness programs and productivity and performance.
When implementing a financial wellness program, it is important to have a multi-channel program and a way to track the effectiveness of each delivery method.
According to Liz Davidson, president and CEO of Financial Finesse, companies need to survey employees 30 days after an educational event to see if they made positive financial changes. Did they take at least one step to improve their finances, like paying off their credit card in full or starting an emergency fund.
Through its research, Financial Finesse found that 401(k) deferral rates averaged nearly 6 percent with one interaction with the company’s financial wellness program. For those with five or more interactions with the program, average deferral rates increased to 11 percent.
Jason Chepenik, managing partner for Chepenik Financial, said during a webinar with Financial Finesse, that one of his clients, Intersil, began a financial wellness program, but wanted to make sure it was relevant to its employees.